Subsection 184(2) - Tax on excessive elections
Administrative Policy
22 January 2019 External T.I. 2019-0791631E5 - Calculation of Capital Dividend Account
CRA confirms that where a corporation has paid a capital dividend in Year 1 based on a capital gain realized by it in that year, a capital loss...
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| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (a) | subsequent capital loss does not reduce capital dividend room | 82 |
IT-66R6 "Capital Dividends"
Subsection 184(3) - Election to treat excess as separate dividend
See Also
4432002 Canada Inc. v. The Queen, 2022 TCC 101
The taxpayer had been reassessed on the basis that deferred sales proceeds received by it were income under s. 12(1)(g) rather than eligible...
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| Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(g) | sale agreement did not have a reverse earn-out so that s. 12(1)(g) applied | 523 |
Magren Holdings Ltd. v. The Queen, 2021 TCC 42, aff'd on other grounds 2024 FCA 202
The appellants engaged in transactions which were intended to result in the realization by them of substantial capital gains (resulting in...
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| Tax Topics - Income Tax Act - Section 185 - Subsection 185(3) | Part III tax assessments of distributions of gains that were denied outside the Part I tax normal reassessment period were not statute-barred | 314 |
| Tax Topics - Income Tax Act - Section 185 - Subsection 185(1) | no requirement to issue separate assessment for each election, and no remedy for inordinate time to issue assessments | 396 |
| Tax Topics - General Concepts - Ownership | acquisition of income fund units to be held for a few days before their redemption did not represent an acquisition of beneficial ownership | 549 |
| Tax Topics - General Concepts - Sham | transactions did not result in real capital losses | 306 |
| Tax Topics - Income Tax Act - Section 245 - Subsection 245(4) | no CDA addition where capital gains were not real | 373 |
Morissette v. The Queen, 2019 TCC 103
In 2011, a corporation (“9158”) paid a dividend (allegedly, a capital dividend) of $485,447 to its wholly-owning parent (“9102”), who paid...
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| Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 53 - Subsection 53(1) - Paragraph 53(1)(c) | Rule 53 does not authorize the rendering of a summary judgment | 228 |
Administrative Policy
7 October 2021 APFF Roundtable Q. 10, 2021-0901001C6 - Application of subsection 184(3) and 185.1(3)
Vendors may proceed with a preliminary reorganization before a share sale and agree in advance that an s. 184(3) election will be made in the...
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| Tax Topics - Income Tax Act - Section 185.1 - Subsection 185.1(3) | concurrence can be given to the election in a share sale agreement before the excessive eligible dividend designation is identified | 175 |
6 October 2017 APFF Roundtable Q. 10, 2017-0709081C6 F - Election to treat excess as separate dividend
The s. 184(3)(b) excess dividend election is made respecting the amount of the original dividend that was payable. S. 184(3)(d) deems the...
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| Tax Topics - Income Tax Act - Section 185 - Subsection 185(3) | normal reassessment period starts running from date of Pt III assessment | 158 |
6 October 2017 APFF Roundtable Q. 5, 2017-0709031C6 F - T2054 - Short Cut Method
In 2011-0412071C6 F, CRA indicated that if the corporation informs the local Tax Services Office that it wishes s. 184(3) to apply, the TSO will...
S3-F2-C1 - Capital Dividends
Examples of excess distributions
1.85 An overstatement of the CDA can arise in a number of ways. Examples include:
- a corporation might pay a...
4 December 2013 External T.I. 2013-0504951E5 - Objection Part III Tax -184(3) Election
Aco, which had a capital dividend account of $100, paid a dividend to its sole shareholder, Bco and elected for the dividend to be a capital...
7 October 2011 APFF Roundtable Q. 4, 2011-0412071C6 F - Modifying a Capital Dividend Election
Where the directors declare a capital dividend and before the payment date for the dividend the corporation (which has individual shareholders)...
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| Tax Topics - General Concepts - Effective Date | originally declared dividend not altered by subsequent resolution | 83 |
8 October 2010 Roundtable, 2010-0373261C6 F - Choix prévu au paragraphe 184(3)
After a corporation is assessed under s. 184(2) in respect of an excess dividend following an audit of the calculation of its capital dividend...
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| Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.5) | no policy to automatically waive penalty where late s. 184(3) election, following failed appeal, is granted | 175 |
5 December 2007 Internal T.I. 2007-0221211I7 F - Capital Dividends
A private corporation (Aco), which had paid a capital dividend out of what it believed to be a capital dividend account balance generated by a...
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| Tax Topics - Income Tax Act - Section 165 - Subsection 165(3) | suggesting awaiting by CRA of a court resolution of a related dispute would be contrary to its duty to act with all due dispatch |
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| Tax Topics - Income Tax Act - Section 184 - Subsection 184(3) | CRA will not accommodate appeal of underlying Pt. I and III assessments by agreeing to act on a waiver if appeal successful or by deferred processing of a s. 184(3) election | 296 |
5 December 2007 Internal T.I. 2007-0221211I7 F - Capital Dividends
A private corporation (Aco), which had paid a capital dividend out of what it believed to be a capital dividend account balance generated by a...
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| Tax Topics - Income Tax Act - Section 184 - Subsection 184(3) | 293 | |
| Tax Topics - Income Tax Act - Section 165 - Subsection 165(3) | suggesting awaiting by CRA of a court resolution of a related dispute would be contrary to its duty to act with all due dispatch |
14 June 2007 Internal T.I. 2007-0229311I7 F - Capital Dividend Account
Subco declared a dividend payable to its parent (Parentco) which, in turn, declared a corresponding dividend to its individual shareholder (Mr....
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| Tax Topics - Income Tax Act - Section 89 - Subsection 89(1) - Capital Dividend Account - Paragraph (b) | recording of dividend payable and dividend receivable between sub and parent was insufficient to constitute the payment of a capital dividend, so that there was no CDA addition | 132 |
| Tax Topics - General Concepts - Payment & Receipt | making accounting entries does not constitute payment of a dividend | 130 |
| Tax Topics - General Concepts - Effective Date | a declared dividend cannot be revoked | 158 |
2 May 2005 Internal T.I. 2005-0119971I7 F - CDA - Excessive Election & Late Filed Election
Xco filed a s. 83(2) election in 2001, whose amount was excessive due to an amount in fact not having been an addition to its capital dividend...
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| Tax Topics - Income Tax Act - Section 83 - Subsection 83(3.1) | where no s. 83(2) election filed for statute-barred year, CRA should request late election under s. 83(3.1) or, failing which, assess a taxable dividend under s. 184(4)(b)(ii) | 121 |
May 1999 CALU Conference No. 9908430, Q. 2
As s. 184(3) only deals with the excess of the full amount of a dividend over the capital dividend account, there is no scope for the Department...
IT-66R6 "Capital Dividends"
Paragraph 184(3)(d)
Administrative Policy
29 June 2007 Internal T.I. 2007-0229431I7 F - Excessive Capital Dividend
A corporation owed a dividend, interest and salary and wages to its shareholders, and effected part payment by way of set off. The total amount of...
Subsection 184(3.1)
Cases
Special Risks Holdings Inc. v. The Queen, 88 DTC 6444, [1988] 2 CTC 244 (FCTD), aff'd 89 DTC 5039 (FCA)
After being assessed for Part III tax, the taxpayer made an election under s. 184(3.1) on the understanding, shared by MNR, that the provision...
Subsection 184(4)
Administrative Policy
21 April 2008 External T.I. 2007-0220471E5 F - Excessive Capital Dividend and 220(3.2)
After a corporation paid a capital dividend to its two shareholders and before CRA assessed to reduce the corporation’s capital dividend...
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| Tax Topics - Income Tax Act - Section 220 - Subsection 220(3.2) | s. 220(3.2) revocation is an alternative if a s. 184(4) election cannot be made | 66 |